CME Group Inc. Reports Solid First-Quarter 2013 Financial Results

CHICAGO, May 2, 2013 /PRNewswire/ -- CME Group Inc. (NASDAQ: CME) today reported revenues of $719 million and operating income of $406 million for the first quarter of 2013. Net income attributable to CME Group was $236 million and diluted earnings per share were $0.71.

First-quarter 2013 results included a $12 million expense due to foreign exchange transaction losses incurred during the quarter principally, related to cash held in British pounds within foreign entities whose functional currency is the U.S. dollar. On a non-GAAP basis, first-quarter diluted EPS would have been $0.73.1

"We have made progress so far this year as we continue to implement our global strategy," said CME Group Executive Chairman and President Terry Duffy. "Our overall average daily volume was 12.5 million in the first quarter compared with 10.5 million in the second half of last year, driven by strength in our interest rate, foreign exchange and equity products. As the over-the-counter market transitions, we are providing our clients with a variety of tools to help them manage risk. Looking ahead, we will keep investing in the company's growth while also continuing to consistently return capital to shareholders in the most efficient way."

"Our focus on expense discipline during the first quarter equated to stronger operating leverage," said CME Group Chief Executive Officer Phupinder Gill. "At the same time, we are expanding our European presence with the anticipated launch of our European exchange this summer, along with new products to the CME Clearing Europe slate, such as the recently launched interest rate swaps. We also posted record trading volume and revenue from Asia, up 24 percent and 31 percent, respectively. Additionally, we are working with hundreds of customers and many intermediaries to ensure operational readiness ahead of the second wave of the OTC clearing mandate that will take place June 10."

First-quarter 2013 average daily volume was 12.5 million contracts, up 1 percent from first-quarter 2012, and was the highest quarterly average daily volume since third-quarter 2011. Clearing and transaction fee revenues were $593 million, down 4 percent compared with the same period last year. First-quarter total average rate per contract was $0.785 cents, down 3 percent compared with first-quarter 2012.

First-quarter 2013 operating expense was $313 million. During the first quarter, the effective tax rate was 38.8 percent. As of March 31, the company had $1.9 billion of cash and marketable securities and $2.9 billion of debt.

CME Group will hold a conference call to discuss first-quarter 2013 results at 8:30 a.m. Eastern Time today. A live audio Webcast of the call will be available on the Investor Relations section of CME Group's Web site at www.cmegroup.com. An archived recording will be available for up to two months after the call.

As the world's leading and most diverse derivatives marketplace, CME Group (www.cmegroup.com) is where the world comes to manage risk. CME Group exchanges offer the widest range of global benchmark products across all major asset classes, including futures and options based on interest rates, equity indexes, foreign exchange, energy, agricultural commodities, metals, weather and real estate. CME Group brings buyers and sellers together through its CME Globex® electronic trading platform and its trading facilities in New York and Chicago. CME Group also operates CME Clearing, one of the world's leading central counterparty clearing providers, which offers clearing and settlement services across asset classes for exchange-traded contracts and over-the-counter derivatives transactions. These products and services ensure that businesses everywhere can substantially mitigate counterparty credit risk.

CME Group is a trademark of CME Group Inc. The Globe Logo, CME, Globex and Chicago Mercantile Exchange are trademarks of Chicago Mercantile Exchange Inc. CBOT and the Chicago Board of Trade are trademarks of the Board of Trade of the City of Chicago, Inc. NYMEX, New York Mercantile Exchange and ClearPort are registered trademarks of New York Mercantile Exchange, Inc. COMEX is a trademark of Commodity Exchange, Inc. KCBOT, KCBT and Kansas City Board of Trade are trademarks of The Board of Trade of Kansas City, Missouri, Inc. All other trademarks are the property of their respective owners. Further information about CME Group (NASDAQ: CME) and its products can be found at www.cmegroup.com.

Statements in this press release that are not historical facts are forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or implied in any forward-looking statements. Among the factors that might affect our performance are: increasing competition by foreign and domestic entities, including increased competition from new entrants into our markets and consolidation of existing entities; our ability to keep pace with rapid technological developments, including our ability to complete the development, implementation and maintenance of the enhanced functionality required by our customers, while ensuring that such technology is not vulnerable to security risks; our ability to continue introducing competitive new products and services on a timely, cost-effective basis, including through our electronic trading capabilities, and our ability to maintain the competitiveness of our existing products and services, including our ability to provide effective services to the over-the-counter market; our ability to adjust our fixed costs and expenses if our revenues decline; our ability to maintain existing customers, develop strategic relationships and attract new customers; our ability to expand and offer our products outside the United States; changes in domestic and non-U.S. regulations, including the impact of any changes in domestic and foreign laws or government policy with respect to our industry, including any changes to regulations and policies that require increased financial and operational resources from us or our customers; the costs associated with protecting our intellectual property rights and our ability to operate our business without violating the intellectual property rights of others; our ability to generate revenue from our market data that may be reduced or eliminated by the growth of electronic trading, the state of the overall economy or declines in subscriptions; changes in our average rate per contract due to shifts in the mix of the products traded, the trading venue and the mix of customers (whether the customer receives member or non-member fees or participates in one of our various incentive programs) and the impact of our tiered pricing structure; the ability of our financial safeguards package to adequately protect us from the credit risks of clearing members; the ability of our compliance and risk management methods to effectively monitor and manage our risks, including our ability to prevent errors and misconduct and protect our infrastructure against security breaches and misappropriation of our intellectual property assets; changes in price levels and volatility in the derivatives markets and in underlying equity, foreign exchange, interest rate and commodities markets; economic, political and market conditions, including the volatility of the capital and credit markets and the impact of economic conditions on the trading activity of our current and potential customers stemming from the continued uncertainty in the financial markets; our ability to accommodate increases in contract volume and order transaction traffic without failure or degradation of performance of our trading and clearing systems; our ability to execute our growth strategy and maintain our growth effectively; our ability to manage the risks and control the costs associated with our acquisition, investment and alliance strategy; our ability to continue to generate funds and/or manage our indebtedness to allow us to continue to invest in our business; industry and customer consolidation; decreases in trading and clearing activity; the imposition of a transaction tax or user fee on futures and options on futures transactions and/or the repeal of the 60/40 tax treatment of such transactions; the unfavorable resolution of material legal proceedings and the seasonality of the futures business. More detailed information about factors that may affect our performance may be found in our filings with the Securities and Exchange Commission, including our most recent periodic reports filed on Form 10-K and Form 10-Q, which are available in the Investor Relations section of the CME Group website. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise.

1. A reconciliation of the non-GAAP financial results mentioned to the respective GAAP figures can be found within the Reconciliation of GAAP to Non-GAAP Measures chart at the end of the financial statements.

CME Group Inc. and Subsidiaries

Consolidated Balance Sheets

(in millions)

March 31, 2013

December 31, 2012

ASSETS

Current Assets:

Cash and cash equivalents

$

1,843.4

$

1,604.7

Marketable securities

60.7

56.6

Accounts receivable, net of allowance

309.2

267.5

Other current assets (includes $40.0 in restricted cash)

172.5

204.3

Cash performance bonds and guaranty fund contributions

9,912.0

6,584.8

Total current assets

12,297.8

8,717.9

Property, net of accumulated depreciation and amortization

709.9

724.0

Intangible assets—trading products

17,175.3

17,175.3

Intangible assets—other, net

2,827.8

2,853.7

Goodwill

7,569.0

7,566.9

Other assets (includes $69.7 and $73.0 in restricted cash)

1,842.0

1,825.4

Total Assets

$

42,421.8

$

38,863.2

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:

Accounts payable

$

31.3

$

41.7

Short-term debt

1,499.0

749.7

Other current liabilities

344.4

240.7

Cash performance bonds and guaranty fund contributions

9,912.0

6,584.8

Total current liabilities

11,786.7

7,616.9

Long-term debt

1,358.0

2,106.8

Deferred income tax liabilities, net

7,412.1

7,413.3

Other liabilities

227.0

220.5

Total Liabilities

20,783.8

17,357.5

Redeemable non-controlling interest

82.2

80.8

CME Group shareholders' equity

21,549.8

21,419.1

Non-controlling interest

6.0

5.8

Total Equity

21,555.8

21,424.9

Total Liabilities and Equity

$

42,421.8

$

38,863.2

CME Group Inc. and Subsidiaries

Consolidated Statements of Income

(dollars in millions, except per share amounts; shares in thousands)

Quarter Ended

March 31, 2013

2013

2012

Revenues

Clearing and transaction fees

$

593.2

$

621.1

Market data and information services

80.9

114.2

Access and communication fees

21.5

19.7

Other

23.0

19.6

Total Revenues

718.6

774.6

Expenses

Compensation and benefits

129.4

135.1

Communications

8.9

10.3

Technology support services

12.4

12.8

Professional fees and outside services

21.9

32.2

Amortization of purchased intangibles

25.9

32.8

Depreciation and amortization

32.6

34.9

Occupancy and building operations

18.5

20.3

Licensing and other fee agreements

21.2

20.7

Other

42.3

24.3

Total Expenses

313.1

323.4

Operating Income

405.5

451.2

Non-Operating Income (Expense)

Investment income

3.6

12.1

Interest and other borrowing costs

(39.0)

(29.1)

Equity in net gains (losses) of unconsolidated subsidiaries

17.5

(0.8)

Total Non-Operating

(17.9)

(17.8)

Income before Income Taxes

387.6

433.4

Income tax provision

150.2

167.1

Net Income

237.4

266.3

Less: net income (loss) attributable to non-controlling interests

1.6

(0.3)

Net Income Attributable to CME Group

$

235.8

$

266.6

Earnings per Common Share Attributable to CME Group:

Basic

$

0.71

$

0.81

Diluted

0.71

0.80

Weighted Average Number of Common Shares:

Basic

331,953

330,814

Diluted

333,372

331,851

CME Group Inc. and Subsidiaries

Quarterly Operating Statistics

1Q 2012

2Q 2012

3Q 2012

4Q 2012

1Q 2013

Trading Days

62

64

63

64

60

Quarterly Average Daily Volume (ADV)

CME Group ADV (in thousands)

Product Line

1Q 2012

2Q 2012

3Q 2012

4Q 2012

1Q 2013

Interest rates

5,613

5,136

4,514

4,094

5,656

Equities

2,390

2,919

2,391

2,532

2,608

Foreign exchange

846

920

846

767

1,010

Energy

1,952

1,741

1,590

1,489

1,730

Agricultural commodities

1,122

1,288

1,171

982

1,084

Metals

385

372

327

324

396

Total

12,308

12,376

10,839

10,188

12,484

Venue

Electronic

10,177

10,595

9,293

8,899

10,908

Open outcry

1,348

1,109

979

751

885

Privately negotiated

229

238

208

210

275

Exchange-traded Total

11,754

11,942

10,481

9,859

12,068

CME ClearPort

554

434

358

329

416

Total

12,308

12,376

10,839

10,188

12,484

Average Rate Per Contract (RPC)

CME Group RPC

Product Line

1Q 2012

2Q 2012

3Q 2012

4Q 2012

1Q 2013

Interest rates

$

0.475

$

0.485

$

0.481

$

0.494

$

0.468

Equities

0.692

0.674

0.685

0.697

0.691

Foreign exchange

0.841

0.807

0.808

0.835

0.848

Energy

1.517

1.496

1.473

1.487

1.390

Agricultural commodities

1.216

1.264

1.301

1.298

1.318

Metals

1.647

1.649

1.693

1.709

1.656

Average RPC

$

0.811

$

0.812

$

0.822

$

0.831

$

0.785

Venue

Exchange-traded

$

0.737

$

0.750

$

0.757

$

0.771

$

0.730

CME ClearPort

2.388

2.510

2.719

2.646

2.360

Note: Fourth-quarter 2012 and first-quarter 2013 volume and RPC data does not include volume and revenue from our acquisition of the Kansas City Board of Trade completed on November 30, 2012. Kansas City Board of Trade average daily volume for first-quarter 2013 totaled 24,579.